5.4 Selected Homeowners Endorsements & Michigan Statutory Provisions
Key Takeaways
The Special Provisions — Michigan Endorsement (HO 01 21) enforces MCL 500.2833(1)(m) appraisal timelines (20 days to select appraisers, 15 days to select an umpire), a 2-year Suit Against Us period tolled from notice of loss until formal denial (MCL 500.2833(1)(q)), 30-day loss payment, and MCL 500.2123 cancellation notices (10 days nonpayment, 20 days during the first 55 days, 30 days thereafter or for nonrenewal).
The Scheduled Personal Property Endorsement (HO 04 61) provides worldwide Open Perils coverage with no deductible and agreed/scheduled limits, plus automatic coverage for newly acquired items in an already-scheduled class (25% of Fine Arts limit for 90 days; 25% of class limit up to $10,000 for 30 days on other classes).
The Personal Property Replacement Cost Endorsement (HO 04 90) upgrades Coverage C (and awnings, carpeting, appliances, and outdoor equipment) from ACV to Replacement Cost with a $500 holdback threshold, but excludes antiques, fine arts, memorabilia/souvenirs, unmaintained items, and stored obsolete items.
Regular home day care for monetary compensation is a "business" excluded under Section II unless the Home Day Care Coverage Endorsement (HO 04 97) is attached, whereas mutual exchange of day care services or caring for an insured's relatives is NOT considered a business.
The Business Pursuits Endorsement (HO 24 71) covers salaried employees (such as teachers or clerical/sales staff) who do not own or financially control the business, while the Personal Injury Endorsement (HO 24 82) adds Coverage E protection for false arrest, malicious prosecution, wrongful eviction/entry, libel/slander, and invasion of privacy.
Selected Homeowners Endorsements & Michigan Statutory Provisions
Quick Answer: Every ISO Homeowners policy issued in Michigan must include the Special Provisions — Michigan Endorsement (HO 01 21), which enforces Michigan's statutory Appraisal rules (20 days for appraisers / 15 days for an umpire), the 2-year Suit Against Us period with automatic statutory tolling, 30-day Loss Payment, and Michigan Essential Insurance Act cancellation notices (10 / 20 / 30 days). In addition, the PSI exam heavily tests optional ISO endorsements that customize Section I and Section II coverage.
1. Special Provisions — Michigan Endorsement (HO 01 21)
Standard ISO Homeowners conditions are modified in Michigan by HO 01 21 to comply with the Michigan Insurance Code (MCL Chapter 28 and Chapter 21):
| Policy Condition | Standard ISO HO-3 Rule | Michigan Statutory Rule (HO 01 21 / MCL) |
|---|---|---|
Appraisal (MCL 500.2833(1)(m)) | 20 days to select appraisers; 15 days for umpire; court of record | Upon written demand, each party has 20 days to select a competent, independent appraiser and notify the other. Appraisers have 15 days to agree on a competent, impartial umpire, or either party may petition a circuit court judge of the county where the loss occurred or where the property is located. Written agreement of any two sets the amount of loss. |
Suit Against Us (MCL 500.2833(1)(q)) | Within 2 years after the date of loss (no tolling) | HO 01 21 keeps the 2-year period and adds the statutory tolling: the time to sue is suspended from the date the insured notifies the insurer of the loss until the insurer formally denies liability. (The statute itself requires at least 1 year or the policy's longer period.) |
Loss Payment (MCL 500.2833(1)(p) & MCL 500.2006) | 60 days after proof of loss and agreement/judgment/award | Payable within 30 days after the insurer receives the sworn proof of loss and reaches agreement, a final judgment is entered, or an appraisal award is filed. Under MCL 500.2006, benefits not paid within 60 days after satisfactory proof of loss accrue 12% per annum simple interest. |
Municipal Fire Escrow (MCL 500.2845 / 500.2227) | None | In listed Michigan municipalities, when the final settlement on the dwelling exceeds 49% of the insurance on it, the insurer withholds the lesser of 25% of ACV or 25% of the final settlement (subject to the residential cap) for the municipality's escrow until the structure is repaired, replaced, or demolished. HO 01 21 applies this to fire, explosion, windstorm or hail, vandalism or malicious mischief, and riot or civil commotion losses. |
Cancellation & Nonrenewal (MCL 500.2123) | 10 days nonpayment; 30 days other | 10 days' notice for nonpayment of premium; 20 days' notice if mailed within the first 55 days of a new policy for underwriting reasons; 30 days' notice for statutory cancellation after 55 days or for nonrenewal. |
| Concealment or Fraud / Innocent Co-Insured | Intentional loss or fraud by any insured bars all insureds | For fire losses, the intentional-loss exclusion and the concealment-or-fraud condition do not apply to an innocent insured, who is paid up to that insured's insurable interest—no domestic-abuse showing is required—and the insurer may subrogate against the insured who caused the fire. For other perils, the standard rules still apply. |
2. Section I & Package Endorsements on the PSI Exam
A. Scheduled Personal Property Endorsement (HO 04 61)
Allows the insured to itemize high-value personal property across 9 eligible classes: Jewelry, Furs, Cameras, Musical Instruments, Silverware, Golfer's Equipment, Fine Arts, Postage Stamps, and Rare and Current Coins.
- Four Major Advantages:
- Broadens perils from Broad Form Named Perils to Worldwide Open Perils ("All-Risk") (excluding only wear and tear, insects/vermin, war, nuclear hazard, and fragile breakage/fading rules);
- Eliminates the policy deductible ($0 deductible applies);
- Bypasses Coverage C Special Theft Sublimits (such as the $1,500 jewelry theft cap); and
- Settles Fine Arts on an Agreed Value basis (the scheduled amount is paid in full upon a total loss), while settling the other 8 classes at the least of ACV/market value, repair/replacement cost, or the scheduled limit.
- Newly Acquired Scheduled Property (Automatic Coverage): Applies only if the insured acquires new property in a class that is ALREADY scheduled on the endorsement:
- Fine Arts: Up to 25% of the total Fine Arts limit, provided the insured reports it within 90 days and pays the additional premium from the acquisition date.
- All Other 8 Classes (Jewelry, Furs, Cameras, etc.): Up to 25% of the limit for that class, or $10,000, whichever is less, provided the insured reports it within 30 days and pays the additional premium.
B. Personal Property Replacement Cost Loss Settlement Endorsement (HO 04 90)
Upgrades Coverage C (Personal Property)—as well as awnings, carpeting, household appliances, outdoor antennas, and outdoor equipment—from Actual Cash Value (ACV) to Replacement Cost without deducting depreciation.
- 4 Categories Ineligible for Replacement Cost (Still Settled at ACV):
- Antiques, fine arts, paintings, and similar articles of rarity or antiquity that cannot be replaced;
- Memorabilia, souvenirs, collectors' items, and similar articles whose age or history contributes to their value;
- Articles not maintained in good or workable condition; and
- Articles that are outdated or obsolete and are stored or not being used.
- The $500 Holdback Rule under HO 04 90: If the replacement cost for the entire loss under this endorsement exceeds $500, the insurer pays no more than ACV until actual repair or replacement is complete (the insured has 180 days after the loss to claim the remaining replacement cost).
C. Permitted Incidental Occupancies Endorsement (HO 04 42)
Used when an insured operates an approved incidental business—such as an office, photography/music studio, or private tutoring school—on the "residence premises".
- Section I Effect: Removes the Coverage B business exclusion for the described structure and covers business furnishings, supplies, and equipment on the residence premises up to the full Coverage C limit (eliminating the $2,500 on-premises business property sublimit for that occupancy).
- Section II Effect: Extends Coverages E and F to bodily injury or property damage arising out of the described incidental occupancy on the residence premises (excluding professional liability/E&O and employee injuries).
D. Home Day Care Coverage Endorsement (HO 04 97)
Under the base Homeowners policy (and mandatory notice endorsement HO 04 96), regularly providing home day care to non-insureds for monetary or other compensation is a "business"—meaning Coverage B structures used for day care are excluded, on-premises day care property is capped at $2,500, and Section II liability (Coverages E and F) is completely excluded. However, two day care activities are NEVER considered a business and are automatically covered by an unendorsed HO policy:
- Mutual exchange of home day care services (two families trading babysitting hours with no money paid); and
- Providing day care services to a relative of an
"insured".
Attaching HO 04 97 buys back Section I property coverage and Section II liability/medical payments coverage for a compensated home day care business (while still excluding corporal punishment, sexual abuse, draft/saddle animals, motor vehicles, and employee injuries).
E. Earthquake Coverage Endorsement (HO 04 54)
The Section I earth movement exclusion removes earthquake from every Homeowners form, so a policyholder who wants it must add HO 04 54:
- Coverage: direct physical loss to Section I property caused by earthquake, including land shock waves or tremors before, during, or after a volcanic eruption. All shocks within a 72-hour period count as one earthquake.
- Special deductible: a percentage shown in the schedule, multiplied by the larger of the Coverage A or Coverage C limit (with a $250 minimum), replaces the regular deductible for earthquake losses to Coverages A, B, and C.
- Exclusions: exterior masonry veneer (brick or stone facing; stucco is not veneer) unless the schedule shows the veneer exclusion does not apply—the veneer's value is subtracted before the deductible; and loss caused directly or indirectly by flood or tidal wave/tsunami, even when triggered by the earthquake.
- Adjuster tip: a fire or explosion that follows an earthquake is covered by the base policy even without HO 04 54, because the earth movement exclusion gives back ensuing fire and explosion.
3. Section II & Specialized Endorsements
F. Business Pursuits Endorsement (HO 24 71)
Extends Section II (Coverages E and F) liability coverage to an "insured" who is an employee (such as a clerical worker, salesperson, collector, messenger, or schoolteacher) for liability arising out of their employment.
- Ownership Ban: Cannot be used if the business is owned or financially controlled by the
"insured"or by a partnership of which the"insured"is a partner or member. - Teacher Corporal Punishment Option: Allows schoolteachers to buy back liability coverage for corporal punishment of pupils.
G. Watercraft Endorsement (HO 24 75)
Extends Section II (Coverages E and F) liability coverage to scheduled owned watercraft that exceed the base policy's automatic thresholds (outboard motors > 25 HP, inboard/inboard-outdrive boats > 50 HP, or sailboats 26 feet or longer).
H. Personal Injury Endorsement (HO 24 82)
Expands Coverage E beyond physical "bodily injury" to cover 5 categories of non-physical "Personal Injury" torts:
- False arrest, detention, or imprisonment;
- Malicious prosecution;
- Wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling, or premises committed by or on behalf of its owner, landlord, or lessor;
- Oral or written publication (including social media) of material that slanders or libels a person or organization or disparages their goods, products, or services; and
- Oral or written publication of material that violates a person's right of privacy.
Key Exclusion: Excludes personal injury caused by or at the direction of an "insured" with the knowledge that the act would violate the rights of another and would inflict "personal injury", or publication of material with knowledge of its falsity.
I. Water Back-Up (HO 04 95) & Limited Fungi/Mold (HO 04 26 / HO 04 27)
- HO 04 95 (Water Back-Up and Sump Discharge or Overflow): Buys back Section I coverage (typically $5,000 limit with a special deductible) for water or waterborne material that backs up through sewers or drains or overflows from a sump or sump pump.
- HO 04 26 / HO 04 27 (Limited Fungi, Wet or Dry Rot, or Bacteria): Provides a scheduled Section I sublimit (commonly $10,000) and Section II aggregate sublimit (commonly $50,000) for mold/fungi remediation and testing when caused by a covered peril.
Under the Special Provisions — Michigan Endorsement (HO 01 21) and MCL 500.2833(1)(q), if an insured suffers a covered fire loss on March 1, immediately notifies the insurer on March 2, and receives the insurer's formal written denial of liability 4 months later on July 2, how does Michigan law govern the "Suit Against Us" limitation period?
The insured must file suit within 2 years of March 1 with no statutory tolling during the insurer's claim investigation period
The insured has 2 years after the date of loss to file suit, and that period is automatically tolled from March 2 until the July 2 formal denial
The insured has 6 years from the date of written denial to file suit under Michigan's general breach of contract statute of limitations
The insured must file suit within 90 days after submitting the sworn proof of loss
A homeowner has attached the Personal Property Replacement Cost Loss Settlement Endorsement (HO 04 90) to her HO-3 policy. After a house fire destroys several items in the living room, which of the following items will STILL be settled at Actual Cash Value (ACV) rather than Replacement Cost?
Wall-to-wall living room carpeting and a 6-year-old kitchen refrigerator damaged by smoke and heat
A 4-year-old leather sectional sofa, a dining room table, and a big-screen television in daily household use
A 19th-century antique oil painting and signed historic baseball memorabilia
Window awnings and outdoor patio furniture
Which of the following individuals is eligible to be insured under the Business Pursuits Endorsement (HO 24 71) attached to a Homeowners policy?
A sole proprietor who owns and operates a retail hardware store
A managing partner who holds a 50% ownership interest in a certified public accounting firm
A homeowner who owns and runs a commercial auto repair shop in a detached garage on the residence premises
A salaried public school teacher who owns no business
Sections you finish are checked off in the contents.